China’s Greater Bay Area was instrumental in the country’s reform and opening-up 40 years ago. Shenzhen, one of the major cities, led the way in experimenting with market reforms. Guangdong Province became a key global manufacturing hub nicknamed the ‘factory of the world’ after China joined the World Trade Organization in 2001, with Hong Kong as its center of marketing, distribution and financial management.
Together with Macau and Guangzhou, plus nine other cities in Guangdong, the Greater Bay Area has a 70m population and GDP of $1.5 trillion – equivalent to the world’s 13th largest national economy and larger than Spain or Australia. It accounts for a third of China’s economic output.
As Guangdong became a wealthy commercial center and Shenzhen matured as an innovation focus the partnership began to change. China’s state council has this year released a sweeping and long-term development plan that envisages new synergies based on each region’s competitive advantages.
Greater Bay is one of three city clusters – along with the Yangtze River Delta and the Jing-Jin-Ji – that will lead China’s urban development. Its mix of major and smaller cities means specialized production can move to more competitively priced cities.
Shenzhen already spends 4.3% of its GDP on research and development – twice the national average. Integrating that with Hong Kong’s universities and Guangzhou makes the area well-placed to lead China’s quest for smart manufacturing and experimentation with new technologies.
It should also significantly expand cross-border businesses and personal financial investment while the area retains its position as a pioneer in China’s capital-account liberalization. And with China’s next stage of opening up focusing on services, Hong Kong’s healthcare, legal firms, intellectual property, logistics, tourism and entertainment businesses should benefit.
Further, as one of China’s wealthiest regions with a retail market value exceeding $400bn a year, Greater Bay is a fertile ground for shaping China’s consumption-driven growth.
The Greater Bay Area already has highways, telecom services, airports and ports, but it needs to improve its infrastructure with easier border crossing and reduce travel between the major cities to one hour. The development plan also sees upgraded information-communication networks and free high-speed wireless links.
While the area already has a large economic impact, better integration and further opening up in the region are essential for it to continue to play a leading role in China’s transformation towards a more innovative and domestically driven economy. It is China’s only city cluster with three different legal systems – the Mainland, Hong Kong, and Macao. Rolling them into one region will require significant political will and resources.
The different employment policies, immigration controls and sector-specific restrictions must not hinder labor mobility either and there are challenges to movement of capital because China is still liberalizing its capital account. There has been some easing in restrictions on labor mobility, including visa requirements and talent attraction schemes, but there is still more work to be done.
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